ALLEGRO MICROSYSTEMS, INC. Q3 FY2025 earnings call

• Q3 sales of $178 million and non-GAAP EPS of $0.07 exceeded guidance midpoint. • Increase in quarter orders, abated cancellations, and highest bookings in 8 quarters (+50% YOY). • Progress in China supply chain localization with shipments from local OSAT partners. • Reducing inventory in direct and distribution channels. • Product innovations: new inductive position sensors, micropower magnetic switches, a fast current sensor IC, and power products introduced at Electronica. • Design wins in automotive (steering, electrified powertrain), industrial (datacenter cooling, high-voltage isolated gate drivers), and TMR solutions in smart metering/medical.

In Q3, Magnetic Sensor sales were $114 million, representing 64% of Q3 sales. Power products sales were $64 million, an increase of 9% sequentially. Total Q3 sales were $178 million.

• Q4 2025 sales expected $180M-$190M (+4% QOQ midpoint). • Gross margin 46%-48% due to 200bps headwind from pricing resets, excess inventory, and capacity. • OpEx up ~5% due to payroll tax resets. • Interest expense ~$6M, tax rate 3%, non-GAAP EPS $0.03-$0.07. • Actions to optimize cost structure, advance China strategy, reprice term loan, and plan debt payment.

• Factors affecting business, including risks to forward-looking statements. • Inventory management challenges. • Geopolitical and regulatory impacts on business operations.

Q: Unpack gross margin guidance impact of underutilization and pricing.

A: Derek explained the 200bps headwind includes pricing resets ahead of cost reductions, excess inventory charges, and capacity charges, and expects March quarter to be a trough in gross margin percentages.

Q: XEV business and growth trajectory.

A: Vineet stated design wins in e-mobility show long-term growth, with over 70-75% of automotive design wins in e-mobility field.

Q: Pricing trends and cost from foundries.

A: Vineet mentioned normal pricing in automotive, and Derek discussed negotiating wafer price reductions in exchange for volume, building strategic die and wafer banks.